Why Many Employees Feel Devalued Even in Booming Job Market

Economic research, government data and interviews with workers sketch a picture of lagging wages, eroding benefits and demands for employees to do more without more pay

By Michelle R. Smith •Published August 12, 2019•Updated on August 12, 2019 at 3:42 pm

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For more than two decades, Ken White worked at a credit card processor. It was a good job, but it fell victim to the Great Recession.

Today, at 56, White does similar work managing technology projects for a regional bank. And yet everything feels different. He is a contractor for a technology services firm that assigns him to the bank. He is paid less, and the bonuses and stock awards he once earned as a full-fledged employee are long gone.

For all the U.S. economy's robust job growth, White and many people like him don't feel much like beneficiaries of what is now the longest expansion on record. The kinds of jobs they once enjoyed — permanent positions, with stability, bonuses, pensions, benefits and opportunities to move up — are now rarer.

White's evolution from employee to contractor is emblematic of a trend in the American workplace a full decade after the recession ended: The economy keeps growing. Unemployment is at a half-century low. Yet many people feel their jobs have been devalued by employers that increasingly assign a higher priority to shareholders and customers.

Economic research, government data and interviews with workers sketch a picture of lagging wages, eroding benefits and demands for employees to do more without more pay. The loyalty and security that many say they once felt from their employers have diminished, and with it some measure of their satisfaction.

Experts point to a sea change in the American job experience that began decades ago but has grown more visible across a wider spectrum of jobs. They see a confluence of forces squeezing workers — from globalization and workplace automation to a decline of labor unions, fiercer price competition and a growing use of outside firms and contractors.

At the same time, the gulf between CEO pay and median worker pay has widened . Publicly traded companies are increasingly plowing cash into stock buybacks and shareholder dividends.

"We've made decisions and baked into the structure this extreme inequality at this point," said Barbara Dyer of the Good Companies, Good Jobs Initiative at MIT's Sloan School of Management, a project to improve management practices. "It's a function of a lot of choices that we may not have even been conscious of."

A collaborative analysis of the 2018 General Social Survey by The AP-NORC Center and GSS staff found a rise in people saying their workplace has grown more demanding.

Around one in three workers said they now face too much work to do everything well. About one in five said they held a job other than their main one. About three-quarters said they had to work extra hours beyond their usual schedule at least one day a month. All those numbers are up from 2006.

Half of working Americans in 2018 said they believe workers need strong unions, up from 40% in 2006. Among workers under 35, 60% favor strong unions at a time when union participation has been steadily dwindling.

Many measures of inequality still have not returned to where they were before the recession: The wealthiest Americans now hold a greater share of the nation's wealth. Middle-income households have less home equity. Median household income, adjusted for inflation, has barely budged in two decades.

And an analysis by the Federal Reserve Bank of St. Louis found that corporate profits have far outpaced employee compensation since the early 2000s.

Paul Nota of Needham Heights, Massachusetts, has worked at CVS since 2002, when he was in high school. Having graduated from college in 2008 with a degree in special education in the depths of the Great Recession, he couldn't find a job in his field.

He stuck with the pharmacy chain, working in several roles — technician, supervisor, assistant manager. He likes the company. But he says it's changed, and not for the better.

In the past, Nota said, it seemed to him that CVS "thought of the employee first before anything else." It bestowed bonuses on work anniversaries and threw company barbecues to show appreciation. Those gestures have mainly gone away, he said, and the company is asking for more from its staff.

"Take a prescription off the phone from a doctor, go get drive through, go help the three people in line, pick up the three people waiting on hold," said Nota, 32. "Then lately there's talk that we're actually going to be vaccinating patients. We're going to be getting certified to actually give flu shots and stuff like that, but we're not going to get paid any extra."

A CVS spokesman, Mike DeAngelis, said the company has invested in tools to make workflows more efficient. New phone technology, for example, helps handle calls, and automation is increasingly used to communicate with doctors and receive new prescriptions.

CVS last year raised its minimum starting pay to $11 an hour and stepped up pay raises, and DeAngelis said turnover among pharmacy technicians has declined.

Though Nota left his full-time job at CVS in 2014, he continues to work there part time while working full time in a pharmaceutical company lab. He said he still enjoys the work at CVS despite a changed culture:

"It's all about rapid growth now. How can you help the bottom line?"

Labor experts point to shifts in corporate culture that have helped disrupt life for American workers. The changes have been building since the 1970s, but they say a broader range of workers are now feeling them. Among the trends is a move to outsource jobs not central to a company's business.

Businesses looking to "to get out of the messy job of employing people" shed workers such as janitors, security guards or tech support, said David Weil, dean of the Heller School of Social Policy and Management at Brandeis University and a former administrator of the Wage and Hour Division of the Labor Department in the Obama administration.

Weil documented the practice in his 2014 book "The Fissured Workplace": Companies hire outside firms to do work formerly done in-house. These outside companies hire people at lower pay with fewer benefits and job protections.

In some cases, work is further outsourced to still other companies. Sometimes, workers are hired as contractors, who are technically self-employed yet often report to the same workplace as full-fledged employees.

An example is the hotel industry. Weil's research found that many major brands have sold nearly all their real estate and shifted to a franchise system. The properties — now owned by private equity firms, investor groups and real estate investment trusts — pay a franchise fee to brands such as Hilton, Marriott and Hyatt.

They often then contract with a third-party management company to run the hotel. That company might hire staffing firms to provide housekeeping, maintenance and food service. In some cases, Weil said, it's possible that not a single worker in a Hilton hotel is actually a Hilton employee, though they must adhere to Hilton's standards.

"You might have 10 different employers, sometimes with overlapping authority, all in that building," he said.

Uber and Instacart are other examples of the fissured workplace. So are universities that increasingly rely on adjunct professors and distribution centers that depend on independent contractors.

Some workers, Weil said, aren't even aware that their employer isn't actually the company where they report to work every day. They might realize it only when they lose their job or are injured at work and learn that they aren't protected by the employment rules and safety protections that traditional workers are.

"A lot of risk has been shifted on to individual workers who are much less able to deal with that risk," Weil said.

There is no definitive data on how many Americans are now employed in these workplace structures. But experts say they're increasingly common.

Ruth Milkman, a sociologist of labor and labor movements at the City University of New York, said people most affected by such fissuring used to be blue collar workers without college educations. In recent years, the trend has crept up the income scale into tech jobs and others that require college degrees.

Deunionization has also taken a toll by eroding workers' voices and influence, she said. The proportion of wage and salary workers who belong to unions was just 10.5% in 2018, down from 20.1% in 1983, according to the U.S. Bureau of Labor Statistics .

"Keeping workers happy is a very low priority," Milkman said.

This marks a shift from decades past, she said, when employers tended to make deeper commitments. But beginning in the 1970s, experts said, more public companies began to regard shareholders as their premier priority. Their focus has increasingly been to demonstrate corporate efficiency and return value to shareholders.

Workers since the 1970s have been "denigrated and devalued as stakeholders," said Adam Seth Litwin, associate professor of industrial and labor relations at Cornell University's School of Industrial and Labor Relations. "When workers had more power, they had a larger share of that income and of that income growth. They don't have that now."

White, the data center manager, said he feels grateful for the work he has now. But his pay is just 70% of what it once was. And there are fewer opportunities to advance.

"They may or may not care about you too much, personally," White said of the tech services firm that is now his employer. "You're filling a slot for them for that client. They're not as engaged."

The median pay of CEOs of companies in the S&P 500 index who have been in their job for at least two years jumped from $9.6 million in 2011 to $12 million last year. To earn as much as the CEO, a typical employee at most big companies in 2018 would have to work 158 years .

Ken-Hou Lin, a sociology professor at the University of Texas at Austin, said that before the 1980s, U.S. public companies as a whole distributed about a third of their earnings to shareholders. In the decades since, shareholder payouts have surged — in some years exceeding the total profits earned across those companies.

Since 2000, Lin said, almost all corporate profits have been plowed back into the stock market, rewarding investors with buybacks and dividends. U.S. corporations in the S&P 500 spent a record $806 billion on stock buybacks in 2018, exceeding the high of nearly $590 billion set in 2007.

Lin's research has shown that a greater focus by companies on shareholders and share prices typically leads to a decline in employment, with blue-collar production and service workers hit hardest . Though many American workers are invested in the stock market, Lin said, "their reality is more tied to their role as a worker, and their reality is more tied to what's happened to their paycheck."

Few sectors of the workplace have endured more turmoil since the recession than retail. Nearly 16 million people work for retailers in the United States. Some, including Payless, Gymboree and Charlotte Russe, have filed for bankruptcy protection this year. Collectively, retailers have so far closed more than 7,500 stores this year , according to Coresight Research.

Such pressures have weighed on workers like Patty Tamez, who wonders whether she has a future in retail. Tamez began working at the Gap in Florida in 2006, transferred to Texas and became a manager. When the store she worked in closed in 2013, Gap found her a similar job in another store.

But three years later, when another store where she worked was closed, Gap didn't offer her an equivalent position, and she left for another retailer. Tamez returned to Gap in 2018 but noticed a difference.

Shipments and store changes often came with little warning. It was clear, she said, that business wasn't doing well. The difficulties trickled down to workers. Shifts would sometimes be cut with less than a day's notice.

"We're constantly changing the schedules every week," said Tamez, 42, of Fort Worth, Texas. "It's pretty stressful. I do schedules, and sometimes it's like, 'OK, how I'm going to get this done?'"

Two years ago, online sales represented 12% of total retail sales, said Craig Rowley, who studies the retail sector for the human resources advisory firm Korn Ferry. This year, it's 15%. In five to seven years, Rowley said, online retail purchases will likely make up one-quarter of sales.

"As you sell less in the store," Rowley said, "you have less money to spend on staff in the store."

That leads to more work for the people who are left.

Rowley noted that online comparisons have made it harder for stores to raise prices because customers can use their phone to instantly comparison-shop and buy from Amazon or others.

A spokeswoman for Gap, Trina Somera, said that the retailer discourages making schedule changes in the same week but that it does happen occasionally. She also said most stores aren't hit by unscheduled deliveries and that Gap is listening to employees about how to improve that process.

Tamez said she was warned earlier this year that another round of cuts was coming and was told that even if she stayed on, her workweek would be cut from 40 hours to 32. After Gap announced it would close 230 stores, Tamez decided it was time to leave. She found a job at Target.

Adam Andersen, 32, of Mission, Kansas, has cycled through different jobs since he began attending a community college after high school. He's worked as a loader at UPS, in the paint department at Lowe's, at a computer drafting job, delivering for Pizza Hut and for Allied Barton, where he was contracted out as a security guard. His most recent job was as a technician at a Sprint operations center.

Andersen said he liked keeping Sprint's cell towers going. But working there as an employee of an outside firm, one of several that Sprint contracts with, could be dispiriting. Workers sitting next to each other received disparate wages and benefits, with Sprint's own employees earning the most, Andersen said. During holidays, contract workers — whose contracts all varied — would bicker about who got to take the day off.

"That's how companies run," Andersen said. "The little guy has not much to lean on as far as bargaining power."

After nine months at Sprint, Andersen showed up for work one day to find that his badge wouldn't scan. He called his boss to ask what was going on.

"My contract company got axed," Andersen said he was told. "They didn't go with that company anymore, so I got the boot."

A Sprint spokeswoman, Adrienne Norton, said the company relies on contractors during temporary spikes in workload and when there is turnover. She said less than 10% of the staff at its network operations center are contractors.

Norton disputed Andersen's assertion that his contract company was cut. She declined to elaborate and referred further questions to the contract company, which did not comment.

"Sprint values all of its personnel — both contractors and our full-time employees — and we work to provide a great environment and a positive experience for everyone," Norton said.

Andersen has decided to leave the industry and plans to pursue a real estate license.